THG cuts profit forecast and launches strategic review
Online shopping group THG has warned that profits for last year will be lower than expected as sales growth slowed.
The company, formerly known as The Hut Group, said the profit downgrade was because of lengthier “onboarding” of new contracts at Ingenuity, its unit that helps retailers sell their products online, plus demand for THG’s own online beauty ranges being hit by courier disruption over Christmas.
The Manchester-based business posted record annual sales of £2.25bn but said it now expected adjusted earnings before tax of £70mn-£80mn for 2022, down from the £100-£130mn forecast in its last update in October.
The retailer said it has taken “comprehensive cost action to increase profitability” and has decided to review “lossmaking categories and territories within the THG OnDemand division”, which includes websites such as Zavvi and Pop in a Box, to increase focus on its core beauty and nutrition ecommerce businesses as well as Ingenuity.
The group said the strategic review would lead to a “simplification” of the group’s business.
These measures and an internal reorganisation which has already resulted in the loss of 2,000 jobs over the course of the year, will save £100mn annually, THG said, and a further £30mn of savings have been identified and will be implemented in 2023.
“While the decision to discontinue certain trading activities has occurred already, the full outcome of the review will complete in H1 2023,” THG said.
THG’s Chief executive Matthew Moulding said: “In a year that presented numerous challenges across the world, I’m proud that the THG team has delivered another record revenue performance at £2.25 billion. Amongst many highlights, I’m especially pleased with the progress of Ingenuity, successfully competing with major global technology giants to transform digital operations for global retailers and brands.
“With the completion of the divisional reorganisation, and around £100 million of annual efficiency savings already delivered, the Group enters 2023 with strong momentum to achieve substantial margin expansion.”